A fail pwn is best described by using an example. Say a friend of yours requests back-up in any video-game, and you tell them you can't play because you are too tired; this would be a friend fail. If on top of friend failing, your friend gets slaughtered in whatever game they played and lets you know the next day about it, the appropriate response from the absent friend would be, "fail pwn," since by their friend fail, the other was pwned.

Jonny: Wow, you left me to die last night on counter-strike. We got completely slaughtered. What a fail.....